Boschma v. Home Loan Center, Inc.

Opinion

IKOLA, J.

The defining feature of an option adjustable rate mortgage loan (Option ARM) with a discounted initial interest rate (i.e., a “teaser” rate) is that for a limited number of years, the borrower may (by paying the minimum amount required to avoid default on the loan) make a monthly payment that is insufficient to pay off the interest accming on the loan principal. Rather than amortizing the loan with each minimum monthly payment (as occurs with a standard mortgage loan), “negative amortization” occurs—a borrower who elects to make only the scheduled payment during the initial…